The Difference Between Tricks & Treats

This year’s headliner is SolarWinds (SWI) — a company that we’ve featured and tracked at Manifest Investing for the last several months. In fact, we discovered it on this list last year and SWI has proceeded to gain 103% over the last twelve months — leading last year’s selections. We’ve been meticulously adding shares of SWI to our Core Diem demonstration portfolio over the last week.

But they don’t have to be scary. As we’ve hunted down buying opportunities from this annual listing over the last several years, we’ve discovered that the best returns tend to come from the entrants with the highest quality ratings.

We obviously like to talk about the companies featured in 2008. These are the selections we bring up at the hair salon or barber shop. There are lessons to be learned (and celebrated) in companies like Neogen (2006), DXP Enterprises (2007), Stratasys (2008), Middleby (2008), Dril-Quip (2008), Boston Beer (2008), Bio-Reference Labs (2008 & 2011), Buffalo Wild Wings (2007-2011), FactSet Research (2008), Peet’s Coffee (2009), Portfolio Recovery (2010-2011) and SolarWinds (2011).

And there are also lessons to be learned — along with the potential for patience for works in progress — from the educational services stocks like Strayer and Capella in recent years … and Quality Systems (2006-2008,2010-2011) — a multiple selection that’s done considerable damage to the all-time results.

All in all, the outperformance accuracy is 50% (3-for-6) and the relative return since 2006 is -1.9% (8.8% vs. 10.7%). But the road ahead is bright, the average overall PAR for the six portfolios is 11.0% vs. MIPAR at 8.9%.

The Good Old Days

I noticed that Forbes had released the 2012 listing on Saturday morning.

Going back over ten years or more, we’ve dissected the list, seeking opportunities for deeper dives. In the good old days, we’d divide the list up among 8-10 people and go about studying and raking — building results to share over a period of several days.

Fast forward to today. Our own Kurt Kowitz has changed all that. Instead, Kurt has liberated us — allowing us to concentrate on auditing the core characteristics and substantiating our milestone assumptions and forecasts. How?

From the time I noticed the listing on Saturday morning, it took all of fifteen minutes to produce the following dashboard: Forbes 100 Best Small for 2012

(Most of the 15 minutes involved looking up ticker symbols.)

It took a little longer to cover the (10) uncovered companies and refresh the database, but we’re now able to isolate the highest quality faster-growing companies with superior return forecasts in another 5-10 minutes.

Copy to Worksheet … sort by quality … and start hacking the companies, reducing the list down to the screening results shown here: Forbes Best Small for 2012

2 thoughts on “The Difference Between Tricks & Treats”

[…] We recently discovered MLAB through the annual publication of the Forbes Best Small Companies a couple of weeks before Halloween. It’s one of our favorite troves and you can read more about it here […]

[…] Our advice from a few months ago to hunt down faster-growing stocks can probably be tempered to shift back to an evenly distributed emphasis on smaller and larger companies. See: The Difference Between Tricks & Treats […]